2022 (4) TMI 355 - AT - Income Tax

Delayed payments of employees' contribution to ESI PF account within the due date provided under the PF ESI Act - HELD THAT - As decided in Lumino Industries 2021 (11) TMI 926 - ITAT KOLKATA if employees' contribution received by an assessee and paid to ESI and PF accounts before the due date of filing of the return, then the assessee will be eligible to claim the deduction of such amounts. With the assistance of Ld. representatives, we have specifically gone through the record and find that payments have been made within the due dates of filing of the return. With the above observation, this appeal of the assessee is treated as allowed. The disallowances stand deleted in this appeal.

Summary

Issues:
Whether the assessee is entitled to deduction of employees' contribution paid before the due date of filing of the return.

Analysis:
The appeal was filed against the order of the Ld. Commissioner of Income Tax(Appeals) for A.Y. 2018-19 under section 250 of the Income Tax Act, 1961. The key issue was whether the assessee could claim deduction for employees' contribution paid before the due date. The Ld. Assessing Officer disallowed the claim based on section 36(1)(va) read with section 2(24)(x) of the Income Tax Act as the appellant failed to make the payments within the due date provided by the PF & ESI Act.

The appellant argued that the issue was covered by judgments of the Calcutta High Court and other cases. The Ld. Sr. D.R. contended that amendments by the Finance Act, 2021, affected the applicability of section 36(1)(va) and section 43B. The ITAT, Kolkata examined the amendment and referred to the case of Lumino Industries Ltd. vs. ACIT. The amendment disallowed employees' contribution if not made within the due date as per the PF and ESI Acts, effective from AY 2021-22.

The ITAT analyzed the retrospective or prospective nature of the amendment based on legislative intent, referring to the case law of M/s. Snowtex Investment Ltd. and Vatika Township Ltd. The ITAT held that the amendment was prospective from April 1, 2021, applying to AY 2021-22 and subsequent years. The decision favored the assessee based on the High Court's view and set aside the order of Ld. CIT(A), directing the AO to allow the deduction of employees' contribution paid before the due date of filing the return.

The ITAT specifically stated that if employees' contribution was received and paid to ESI and PF accounts before the due date of filing the return, the assessee could claim deduction. After reviewing the records and confirming that payments were made within the due dates, the ITAT allowed the appeal, deleting the disallowances.

In conclusion, the appeal of the assessee was allowed, and the disallowances were deleted. The judgment emphasized the importance of timely payment of employees' contributions for claiming deductions under the Income Tax Act.